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tv   Power Lunch  CNBC  May 22, 2012 1:00pm-2:00pm EDT

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time for the final trade. around the horn. patty. >> cortez? >> long qqq. >> get your yoga on lulu. >> more "fast" at 5:00. follow scott wapner. more "power" now. >> half-time is over. the second half of the trading day starts now. >> here's the kickoff, everybody. facebook's face plant. that is story number one today on "power lunch." good afternoon. i'm tyler mathisen. shares of that company still struggling at this hour. the stock, of course, tanking again early this morning. right now down another $1.52 at $32.51. that a nearly 4.5% slide. the next shots being fired in the war between washington and wall street. key hearing being held today as congress looks into jpmorgan's
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big loss. the sec promising senators it is going to investigate. and machines versus man. standing up for the little guy. today we have major support from jim cramer. coming up, what needs to be done to level the playing field so the machines, the high frequency traders, don't end up screwing you. sue herera starts our coverage at the new york stock exchange. sue? >> good to see you, ty. issue number one, you said it. facebook and the big mess at the nasdaq. shares down almost 15% from friday's ipo price of 38 bucks a share. nasdaq is in the center of the storm on this one. and since friday shares are now down about 2%. kayla tausche is at the nasdaq after the company held a key shareholder meeting earlier this morning. kayla? >> sue, that shareholder meeting was for the fiscal year of 2011. they're voting on a few things that election of the 11 board members, bob grifeld compensation as ceo which they
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easily waved in. there was one mention of facebook when grifeld acknowledged what happened on friday and says the value proposition for listing on the nasdaq is stronger than ever, pointing to western digital switching its listing from the new york stock exchange, and that announcement came yesterday. he pointed out a lot of other names that also switched their listing. that was the only real mention. we expected a lot of q & a. that didn't happen. the meeting was only 23 minutes long. as i said before, they said the listings business had never been stronger. as far as what nasdaq is facing right now, we did see a note from jeffries that said the stock remains a hold. that management will have to figure out the liability outside of the constraints put on it by the sec. we still are seeing wide ranging tallies for what that liability could be. that's the next number that we want to see be pinned down here. >> all right, thank you very much, kayla. let's go now to jeff
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killburg of killburg capital and ask the question how do you trade the social networkers? are they all going to move, jeff, as a flock along with facebook? >> it certainly seems that way, ty. truly the facebook frenzy continues. i'm on the wrong side of it. i know that. but i really think, you know, we have another week here before these options come out. that's when the pros come in, ty. once you see those pros come in you'll see some stabilization. if you're in on facebook, you might as well like zynga. they're getting hit as well. obviously they're kind of tied together. if the facebook boat rises we'll see zynga rise as well. linkedin, that's the true winner today. up nearly 7%. i think people are really staying away from these other social media stocks and they're piling into linkedin which is a proven track record. but, finally, groupon. i don't like groupon. i think it's a trendy trade. see it down nearly 50% over the year. i think groupon people are going to continue to sell and pile into linkedin. but stay tuned. because later in the show, ty, i'm going to be giving you my favorite social media place.
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three times the size of the twitter users out there. stay tuned. >> meet the flockers in the facebook case. jeff, thanks very much. we're going to get that other pick coming up. first, why don't we do a little wealth tracker on three of facebook's founding fathers. mark zuckerberg leading the way. he lost a lot of money in the past couple of days. started last friday at roughly $20 billion of facebook wealth. now it's down to a piddling $16.4 billion. dustin moskovitz was at $5 billion friday. today at $4.3 billion, poor guy. and eduardo saverin who at one point was saying he wanted to renounce his citizenship because u.s. caused him a tax problem. you know, he's down to a mere $1.7 billion. poor little darling, sue. >> indeed, ty. meantime in washington, lawmakers are holding hearings on capitol hill today into jpmorgan's giant trading loss. shares of the banks, however, have had a rebound. jpmorgan is actually up almost
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5.5% now at 34.28. the stock recently, though, as you know, has taken a beating. down about 10% notwithstanding today's bounce. eamon javers is live on capitol hill for us with the details on those hearings. eamon? >> reporter: hi, sue. well, tough questions today for these regulators from lawmakers up here on capitol hill. they wanted to know about jpmorgan. they wanted to know about mf global, too. the senators haven't forgotten about that. and facebook was in the air today as well. just after the hearing i had a chance to catch up with mary shapiro of the sec. and i asked her whether individual investors can still have confidence in these markets given everything that we've seen going on. take a listen. >> i think there's a lot of reason to have confidence in our markets and the integrity of how they operate. but there are issues that we need to look at, specifically with respect to facebook and as we just testified to, we're all looking carefully at the jpmorgan trading. >> can you tell us about what
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you've learned about facebook so far in your investigation? >> i really can't talk about it just yet. as we said, we're very clearly focused on it. what happened with the trading. and whether there are any implications beyond that still under way. >> reporter: do you have a time frame for when you think you might have some answers? >> i don't. i'm sorry. >> reporter: clearly here we're seeing that mary schapiro doesn't want to talk about what they're finding in the facebook question and answer period they're engaged in. she wouldn't even give us a sense of exactly when they will have answers but she says the sec is looking into it, sue. >> we look forward to getting some of those answers. eamon, thank you very much. breaking news right now from the bond pits in chicago where $35 billion in 2-year notes was just up for auction. rick santelli is tracking the action at the cme. i got a peek at the bid to cover. it looks pretty strong on the surface. but, you know, you look in between those numbers. what do you see, ricky. >> your first sense is an accurate one. the bid to cover was 3.95 that sue alluded to.
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the 10 auction average is 3.62. you have to go back to november to find a higher bid to cover. and then after you find that one, you have to go all the way back to '07 before you find another one. so that was solid. indirects were about average at 33.5 over the last ten auctions. directs were a little light at 9%. here's the big deal. the yield came in at .30. that's right where it was trading. that was the high wi. 57% of this auction was taken down by dealers. and that's important. because the dealers have been buying boat loads of 2-years that the fed is selling. the germans are going to have a 2-year. it's going to have a zero coupon. this gets to be an "a" auction based on demand. but it raises many questions, and the first question is they're going to need more cabinets in these dealer shops to put all these 2-year notes. back to you, tyler. >> we know some carpenters, rick. we'll take care of it. several sectors in the heat of earnings season. we're going to get to courtney reagan and retail in just a
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moment. but first, seema mody and a big mover in medical devices, seema. >> that's right. shares of medtronic currently trading in negative territory. even though a pickup in medtronics diabetes and coronary business units as well as strong growth in emerging markets helped the medical device maker beat street estimates. its cue for earnings jumping 28%. over the past two years the economically sensitive med device space has been under pressure. analysts at jeffries telling me that growth has been slower both because of the short-term issue related to the economy and demand for medical care, but also because pricing in a lot of these markets is under increasing pressure. we'll be discussing the head winds facing the medical device space today on "the closing bell" with the ceo of medtronic, omar ishrak. 3:40 p.m. eastern standard time. don't miss it. >> let's see how some of the major medical device makers are fairing this year. st. yud up the most. boston scientific up about 10%.
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johnson & johnson and medtronic both, however, down about 3% year to date. speaking of one that is down year to date or over the past year, best buy reporting this morning it did beat the street. the struggling electronics chain also sticking with its outa look for the full year. shares now up 31 cents, almost 2%. the stock, nevertheless, sitting right near a three-year low. courtney reagan on the retail beat. courtney? >> tyler, while best buy beat on the top and bottom line for its latest quarter earnings are down 25% year over year. despite a quarter muddieddy executive shakeups the electronics retailer did post pockets of strength. best buy's first quarter comp store sales slumped 5.3%. strength in mobile continued. mobile phone comp store sales up 13%. additional online revenue gained 20%. on the earnings con train call interim ceo mike mikan said while best buy used to hold a
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number of competitive advantages today's marketplace is different. one best buy was not prepared for. he noted best buy's customer experience is no longer unique. as best buy shares do hover around three-year lows, mikan says the company needs to change who it is, what it does and how it relates to both customers and shareholders. and this marks the beginning of a turn around. we'll have to wait and see exactly what that turnaround has in store. tyler? >> exactly, courtney. time will tell. meanwhile giddyup, partner. ralph lauren easily beating profit estimates. dugli sales growth at its own stores. gains in online business fueling the results at rl. the company expects sales for the year to be up by a mid-single digit percentage. the stock has been on fire. there you see it sitting near a 52-week high. up 3% today at 151.60.
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sue? >> also up today, the housing stocks. they're in rally mode with some big percentage gains in the likes of pulte homes and lennar and also standard pacific. stae sales were up last month. home prices are the real headline. cnbc's diana olick is live in washington with the details. >> hey, sue. home sales continue to rise modestly. but the type of home selling is changing dramatically and that is why we saw a whopping 10% jump in home prices in april year over year. no, prices didn't suddenly rebound. it's the mix of homes selling that changed very quickly. take a look. homes priced under $100,000, which are largely your distressed properties, foreclosures and short sales, dropped in april nationwide and dropped over 26% out west where the bulk of all that distress has been. meanwhile sales of homes priced between $250,000 and $500,000 jumped across the nation. 20% and higher month to month.
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this is because, as we reported widely in april, supplies of distressed properties are drying up. first because investors have been inhaling them. second, because after the $25 billion mortgage servicing settlement, banks are taking many loans that were in the foreclosure process and taking them back to delinquency, trying again to modify them. so the share of all cash, distressed and investor sales all dropped in april. we've got more numbers and more charts on the blog. realtycheck.cnbc.com. a key nbc news/"wall street journal" poll will be coming out later today. but one important question was just released to our john harwood and he is also in washington for us. john? >> reporter: tyler, tremendous attention to that decision by president obama a couple of weeks ago to come out in favor of gay marriage. now we've got some findings from the "wall street journal"/nbc poll that tells us whether it's going to affect many votes. and the answer is no. when you look at -- when you ask people whether the decision by the president is going to make them more or less likely to vote for the president or mitt
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romney, 17% say more likely to vote for obama. 20% more likely to vote for romney. 62% say it's not going to make any difference. our pollsterings say it reinforces the intensity of the bases on both sides. we did have a separate question that asked would you support a state-level same-sex marriage law in your state? 54% said, yes, they would support that. 40% said no. of course, the question electorally is which are those states and which battleground states is there majority support for gay marriage? when you look at states like ohio, pennsylvania, north carolina, virginia, not at all clear what the answer to that is, sue. >> indeed, john. thank you very much. well, this week just got a little worse for kleiner perkins. one of silicon valley's best known venture capital firms. they reportedly had an early investment in facebook. now they're embroiled in a high profile sexual harassment suit. jon fortt joins us live in san jose with the details. >> i got the suit right here. here's what we can see inside it. allen powell, partner at kleiner
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perkins is suing the firm for sexual harassment and discrimination. when she complained to the top people at the firm including legendary ray lane, they acted late or not at all. she claims after that she and other female partners were excluded from meetings and cut out of deals. let me emphasize that this lawsuit, of course, tells just one side of the story. i called kleiner perkins. they sent me a statement that reads in part the firm regrets the situation is being litigated publicly and had hoped the two parties could have reached resolution were particularly given pao's seven year history with the firm. this is a big deal. silicon valley very subconsci s subconsciously views itself as a discrimination free. it's going to spark a lot of conversations here, sue. >> i'm sure it will, jon. thank you very much. switching gears here, no pun intended, we have heard a lot about gains for u.s. car makers
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in the last few months. now the foreign guys are taking the gas out of their gas tank. that's coming up next on "power lunch." also ahead, rocket time. it's the start of a new era. that's all straight ahead. before the break, some five big movers today. urban outfitters up 8%. gen worth financial up 5%. frontier communications, jpmorgan chase up.
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we've been hearing a lot about the revival in the auto industry. but despite gm's resurgence since bankruptcy, chrysler's restructuring and ford's rebound, the big three are still losing market share to foreign rivals. phil lebeau?
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>> we've got data we've collected with polk automotive. 2008 to 2011, the three largest states when it comes to auto sales. starting in california which is the largest. you'll see the big three lost 2.9%. the asian automakers were also down. where did all these sales go? definitely to the european brands. shift down to texas and you see the big three and the asian automakers both were down there. european brands picking up 1 ppt 9%. down in florida, this is where the biggest losses were for the big three. domestic automakers losing 5.8% market share. europeans gaining 2.2%. what happened for the big three? well, they lost share in part because they consolidated a lot of their brands and they were building up core brands like ford and chevy. in the process they were being squeezed by the luxury brands on the high end and more competitive brands like hyundai and kia. as for the european brands they've come on strong across the board picking up market
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share in all ten of the largest states when it comes to auto sales. european luxury automakers are doing it two-fold. more suvs and more entry level mode models. as you take a look at shares of ford and gm, sue, keep this in mind. yes, they're both down for a number of reasons. but the market share losses, many have thought that by now it would stabilize, sue. it hasn't. and the question remains, when will it stabilize? and nobody's quite sure. sue? >> indeed, phil. thank you very much. along those lines, here's how the major automakers are doing so far this year. toyota up the most by more than 17%. followed closely by honda and gm which are up about 7%. but ford has really been the laggard. it's down 4% year to date. as we continue on "power lunch," space goes private. history was made today down in the sunshine state and also up in the stars. up next, how you can profit from it. also coming up, what the machines are doing to your
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three, two, one, privatization? blast off! space x made history today as its falcon carrying a capsule with 1,000 pounds of space stuff blasted off to its destination, a international space station. this marks the first time a private company has sent a vessel into space for nasa to go
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to the space station. nasa's shuttles use to provide the space station with its provisions. now that the shuttle program has ended private companies are moving in. the question for you as an investor is, what does it mean for the defense sector? jane wells is taking a look. hi, jane. >> reporter: hey, tyler. you know, aerospace was born in southern california. it is being reborn, much of it, here inside this old boeing hangar which now houses space x's headquarters. this is where mission control is. as space x is proving itself to nasa, actually half of its future contracts are with private contractors trying to diversify its customer base and not depend so much on the government. the company's successful and dramatic launch this morning takes space business away from russians. also potential business from lockheed and martin. how dependent are these other companies on government work? who has the most to lose? lockheed martin.
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prime contractor for the f-35 and other programs. according to standard and poors 99% of lockheed's revenues come from governments, plural. lockheed says 82% of all sales comes just from the u.s. government. 61% just from the pentagon. that's because lockheed and other defense contractors do a lot of i.t. work for various government agencies. all right. compare that 99% to 90% of all sales are government related for north rup and l3rks. 86% for raytheon. 37% for boeing. saic's sales are 100% government related. not sure that's a growth industry. usually is. not sure it is now. >> jeff kilburg how do you play a defense sector here? and is private space flight likely to be germane to these companies' fortunes. >> it's a great point jane brought up. lockheed has really been a growing, dynamic company. 100 years.
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i think as they continue to roll out products into unmanned drone space they're going to be great. north rup supply an array of products to the department of defense. thirdly, raytheon. tomahawk cruise mismissiles. lastly i like laurel. they're the leading provider of the satellites out there. they're bringing tv, broadband, all types of services to regions. they're very involved. something to look at. >> take a look at the defense sector generally speaking. >> i think it's going to grow. up, up and away. >> thanks very much. the metals markets are about to close. and we will hit the nymex after this. and we learn just how dangerous it could be in james cameron's "terminator." now new details on how destructive the machines have become to the individual investor. >> i'll be back. it's gonna be a casual thing. ♪
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another tough session in the metals markets. the gold market closing right now. sharon epperson is tracking the action at the nymex. the only plus sign i saw was in palladium. copper is down. the rest of the entire complex is lower. >> entire complex is lower and
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the euro is largely the culprit. we saw gold prices. they're about to close now. at the lows of the session. the euro has all been falling. it all happened around that european close. of course, when the investment firm downgraded the rating on spain, that is what seemed to predicate all of the slide we've seen. the majority of it. because gold prices looked like they were starting to recover earlier in the session. we are also waiting to see whether or not gold will continue to trade as a risk asset as it had done in the beginning of last week and for several weeks, or as a safe haven, as what we saw at the end of last week. hspc says a lot of it has to do with what the u.s. economic data has to show. but, of course, other traders say they're watching, sue, what happens with that eu summit in brussels. the euro direction. that will likely indicate where metals trade in the session ahead. back to you. >> thanks, sharon, very much zplnchts down here on the floor of the nyse we've lost a little strength. we were up about 50 pounts. now up about 36.
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bob pisani joins me here on the floor. financials finally kicking in. >> a little bit. just on gold. i don't know if you saw a world gold council released its quarterly report on gold demand. big drop in india for gold. that's a major reason gold has been down. 50% of the gold in the world goes to india and china. they've been trying to wean people away from gold. >> their economy hasn't been doing as well either. >> the economy. and the week rupee has hurt. we have this strange problem here. there is what i call crisis tennis going on. you've got all these problems here with excessive debt reasserting itself. then you've got hopes that the european central banks or central banks anywhere are going to prime the pump. we were up in the last two days in hopes that this big eu summit tomorrow was going to have a whole bunch of ideas on how to prime the pump. a lot of cynics are saying some of this isn't going to work. some of it isn't going to happen. a lot isn't going to happen
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because of political and treaty problems. nobody's going to snap their finger and do things. watch the euro on a daily basis. watch the whole game, this crisis tennis being played out in the euro. >> there are calls i think by citi that if greece exits the euro we're basically going to go to parity. >> that's a long, long way down. >> exactly. i don't know that they're right. but it's out there. let's head to brian shactman with the market flash for us. >> i'm keeping my eye on google right now. about to broach $600 a share to the downside. down about $13.50 worth. they closed the deal with motorola mobility at the beginning of the tay. the most recent item of news examining complaints google favored its own services at the expense of others. there are reports out there the u.s. is questioning ebay and yelp to the extent of whether this happened. no adjudication or conclusions here. certainly the fed's looking into it. back to you. >> thank you, brian, very much. all right. let's head to the nasdaq now. courtney reagan is following the
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big movers there today. hi, courtney. >> good afternoon, sue. we're going slightly to the upside here at the nasdaq when you look at the composite. look at seagate technology. down almost 6%. we've got some heavy options action, specifically the puts. about four times normal volume. that's pushing shares significantly lower. but moving on to urban outfitters, this is at a other end of the nasdaq 100 today. up 7.5% on the back of better than expected profit and improved same-store sales. though unfortunately it wasn't all good there for the retailer. look at shears of lexion. up 5.5%. it will replace motorola mobility in the s&p 500 at the close of trade on thursday. also at the nasdaq, the company meeting with its shareholders today facing some heat over its handling of the facebook ipo debacle. a check on shares of facebook and the nasdaq. facebook down 5.3%. kayla tausche rejoins us now
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from the nasdaq in times square. what are the latest headlines, kayla? >> sue, really the news is that there is no news today. a second floor occupied by shareholders of nasdaq today addressing about five proxy proposals from the year 2011, one of which was approving ceo bob grifeld's pay. it was about a 23-minute meeting. many were expecting it to go much longer, expecting them to delve into q & a and opening up the floor for questions which could involve facebook. that simply didn't happen. the only questions that they drew were simply on those proxy proposals and there really were no hands raised when that happened. as far as what happens to nasdaq stock from here, jeffries saying that the fallout is likely to linger, rating the ndaq stock a hold and saying it's ultimately up to management to figure out the real liability here because the sec has a cap on what they can pay nasdaq has to take it into its own hands as far as figuring out what those botched trades are worth. sue? >> kayla, thank you very much. ty?
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>> i'll take it. let's bring in jeff kilburg. earlier you gave us your facebook -- you heard of this company, facebook? >> heard about it. >> the sympathy plays there. your number one social media space idea. >> the number one, ten cent. it's traded on the hong kong exchange. you can -- i actually have a tencent account. my friends at who say allow me to tweet. it gets translated. >> you reach how many people? >> about 50,000 folks over in china. >> in china following kilburg. ten cent traded on the hong kong exchange. your favorite pick there. a new report out this hour on the state of homeownership in a still shaky housing market. the one that as diana reported earlier seems to be showing some signs of improvement. what's the latest on homeownership. >> some, tyler, that's true. homeownership is still falling. the dream of homeownership is
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alive and fell. on a scale of one to ten, ten most important, voters rated homeownership at 8.6. when asked to consider the importance of homeownership compared to five years ago when the bubble burst, one-third of voters said homeownership is more important. about half said the same. just 12% said homeownership less important than five years ago. finally, nonhomeowners surveyed were given a list of potential factors keeping them out of house ing. the top choice, nearly one-third, said it was a salary issue. a close second, the down payment. sue? >> diana, thank you very much sfwlnchts let's recap some of the other big headlines driving today's session. jpmorgan on a tear today. shares are up for a change. by more than 5%. general mims cutting 850 jobs as part of a restructuring plan. about 2.5% of global workforce. keep an eye on dell. the pc giant reports its numbers after the bell. get the first word on the results as soon as they cross right here on cnbc. coming up next, rage against
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the machines. is endless financial engineering like high-speed trading hurting the markets and hurting the small investor? our answer is yes. and we're taking a stand on that. back in two minutes' time. [ creaking ] [ male announcer ] trophies and awards lift you up. but they can also hold you back. unless you ask, what's next? [ zapping ]
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welcome back to "power lunch." brian shactman at the markets desk. i want to take a look at ra, rail america. a power lunch pop. the jacksonville business journal reporting that the company is up for sale. take a look at that spike right there. now up almost 8%. tyler, that is your "power lunch" pop of the day. back to you. when jim cramer talks, we listen here at "power lunch." he is for the small investor, the little guy. and so are we. so we do listen. and he summed up the war between man and machine as well as anyone could on last night's "mad money." take a listen. >> the individual investor has
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seen the enemy. and it isn't herself. it's endless financial engineering and the arrogance associated w ed with it. time and again that's the real issue behind the woes we get so frequently. >> facebook may be another example of the individual investor getting mauled by the machines. is there any way to make it an even, level playing field? bob pisani recently produced a documentary about it. eamon javers had a fwraet report last week. let's talk to both of them now. bob, are the high frequency traders, are the financial synthetics, the enemy of the little guy? yes or no? >> no. i don't think so. i certainly wouldn't try to compete against machines, tyler. but we have the system the sec gave us. 15 years ago they decided they wanted to break up the monopoly of the new york stock exchange and the nasdaq and go to pennies and allow these kinds of trading systems. the answer is, no, they are not the enemy although i wouldn't compete against them on a daily basis. >> eamon, your view on that point? >> well, they can be. it can be very difficult for
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individual traders at particular times of the day, even. i talked to a guy from nanex, eric huntsiter who said last week his advice to individual investors is don't trade at all between 9:58 a.m. and 10:02 a.m. that's the period of time before big economic mark moving pieces of news are announced in washington. high speed traders like to jump in in those low moments just before a big piece of news and disrupt markets. if you're caught in there, the bid and ask can get all out of line. you might be buying a stock for a price that you might not expect to be buying at. >> so do professional traders. 15 years ago, tyler, you were around. remember the guys who were day traders? they used to complain professional traders had access to information faster. there's always been complaints. this has been around forever. >> it does seem as though the whole methodology, ail algorithms and the speed of both the computers and the transmission lines has changed. gentlemen, thank you very much.
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sue? >> all right, ty. on the floor with me now is justin shack, managing director with rosenblatt securities. a man, if you will, behind the machines. justin, nice to have you here. >> thanks for having me. >> you heard the discussion. obviously, high frequency trading has been in the news for some time now. most recently obviously with facebook. how do you respond to those critics who say basically it skews the market, squeezes out the little guy, that this is not a market anymore for the individual investor as a result? >> i'm happy to address that. i should quickly point out we are not high frequency traders. we're a brokerage firm. we know a lot about high frequency trading. we don't actually do it. >> good to know. i apologize. >> that's okay. what i would say, you know, i think some of the points raised on the previous segment were interesting. why would a retail trader want to compete with a professional? i think it's a losing battle regardless of whether they're using the machines between their ears or the machines that are in
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a computer. i like to play hockey. i go out and do it on the weekends with a bunch of old, slow fwis liguys like me. i don't take on the new jersey devils. it wouldn't make sense at all. >> the u.s. markets were created for people to buy a piece of american companies. it was started for the individual investor. you think that's no longer the case? is that appropriate that the individual investor basically cannot compete in what is arguably the biggest and greatest financial system in the world? >> because they can't compete with a professional trader that's trying to make a profit in a fraction of a second doesn't mean that they can't be successful as investors. what i would say is don't try to play the game that the professionals play. perhaps don't even trade individual stocks. stick with an index fund. stick with a cheaply run actively managed fund. if you do want to invest in individual stocks, your goal is to buy something today with this big of a pile of money. at some point further down the
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line, a lot further down the line wind up with a pile of money that big. >> if you do buy, buy and hold? >> at least hold for longer than the fraction of the second that these professional traders are doing. doesn't make any sense to try to beat them at that game. it never has in the markets, even when they were manual. >> it seemed more equitable, though. do we risk losing -- >> it was actually less equitable. >> you think it was? >> yeah. >> how so? >> right now the guys that make the markets on the floor here have competition from hundreds of other firms. before the transformation bob talked about that took 15 or so years there was one market maker in every nyse stock and one market maker only. they inherited that from being around when the wall was built down the street here by the dutch. >> right. do you think, though, we risk as a result of the way the markets have evolved, rightly or wrongly, do we risk losing a generation of investors who may choose to put their money in other assets rather than invest in either mutual funds or stocks or other --
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>> i think we're already losing them. but it has nothing to do with market structure and high frequency trading and it has everything to do with all of the crazy volatility and boom and busts -- >> that just doesn't make any sense, justin. >> it makes all the sense in the world. >> one of the problems individual investors have, i maintain the reason they're falling out of the market, they see -- i apologize to you. you're not a high frequency trader. they see the dislocations in the market. that high frequency traders can visit upon the markets on a day like friday. and they say this game is not for me. when you've got some very high percentage of all the trades on all the markets being put in and then immediately canceled, that's crap. you know it. >> i would disagree respectfully. i don't think it's crap at all. i think people have always tried to manage their risk if they're making the market. whether it was the people down here on the floor -- >> that's not my point. the point is the individual investor seeing that goes, this is not for me, and they pull out. the high frequency traders, the people who deal in the synthe c
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syntheti synthetics, always talk about liquidity, liquidity, liquidity as though -- and it is their mantra. that's what they do. that's what tay bring to the markets. when you have too much liquidity, what happens to you? you drown. if the individual investor pulls out, all of that individual investor's liquidity which is a huge part, huge foundational stone of the capital formation in this country, is going to go away. and that probably is not a good they think. >> i don't know what you're talking about exactly with respect to synthetics. i can tell you this with respect to high frequency trading. it's one aspect of a drastically changed market as bob talked about earlier that we've seen as a result of government regulation that started, you know, 15, 16 years ago. and if you look at the outcomes that people get today, forget about when things go wrong. things always go wrong, right? they always will go wrong. the market is working on correcting that. so are the regulators. if you look at the outcomes people get, institutional and retail, by the way, most of the money from average americans in the stock market is in the stock market through institutions. through our customers who we
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represent. they're getting better outcomes than ever. their transaction costs are much lower. the market is much more efficient than it was 15 years ago before this started. >> what are you hearing? we should emphasize you don't do high frequency trading. you study it. you are a brokerage firm. what are you hearing about facebook? >> it's a great question. a lot of questions more so than answers now. there was a lot of frustration from the retail community who thought, hey, this is a deal i can actually get involved in. >> exactly. >> the underwriters made more shares available. a lot of that has nothing to do with high frequency. it has a lot to do with the decisions underwriters in the company made. i think it's a general rule of thumb. i'm stealing this from somebody i heard it from yesterday. if it's a deal you can get into as a retail investor you probably don't want to be involved. >> that speaks volumes. justin, thanks a million. appreciate it. >> thank you for having me. ty, over to you. brian, actually. >> i'm the shack. he might have shakt. i'm shack. netflix down 5% today.
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once the mighty positive story of 2012 has fallen quite a bit. the last two months down 42%. it is now officially negative for 2012. back to you. >> thanks very much. shack. a shack attack. up next, what's worse on wall street? jpmorgan's multibillion dollar trading loss or morgan stanley's facebook ipo debacle? which is going to do more lasting damage to those formerly white shoe firms. here is some irony. while many people are talking about mark zuckerberg's marriage, facebook is now a factor in divorces. you probably knew that already. what you should know, straight ahead. watch your tweets.
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we were pondering a question today about whether or not the fallout from the facebook ipo debacle might be worse for morgan stanley than the $2 billion trading losses for jpmorgan. which bank do you think wall street will punish more? neil wineburg, editor in chief at american banker. good to see you again. >> my pleasure. >> i was wondering about this. given the fact we still don't have a resolution to the entire facebook ipo story yet, there's a lot of talk on the street that
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the losses or the -- what morgan stanley will have to make good on could continue to rise. whereas jpmorgan seems to be getting a little bit more of a handle on its trading losses. they may rise as well. which do you think wall street is going to be harder on? >> certainly jamie dimon deserves to thank james gorman for taking the heat off him. i honestly think what jpmorgan is facing is more fundamental. obviously this is a big piece of their business. here an ipo, very public, huge amount of egg on their face, terrible pr disaster. ultimately it will get worked out. there's a lot of people to blame. you can blame the nasdaq. i think you can blame investors. they wanted free money. there's no free money. tough luck as far as i'm concerned. >> okay. >> i think this too shall come to pass. remember, amazon was way down when it went public. >> that's a good point that hasn't been brought up. we're going to go into the rundown. maybe we can bring that up at some time. today's focus is facebook on the rundown. jon carney joins us. first topic on the rundown is
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facebook shares falling for a second straight day. will the social network giant ever see $38 a share again? what do you think, jon? >> some day. not any time soon. remember, it's not just this early volatility that we're going to see. more shares are going to be coming to market over the course of the next six months, the next year, and we're going to see more pressure on the shares. so i think 38 might be a while coming. >> do you agree, neil? also soon they're going to lift the restrictions on shorting the stock and options and things like that. >> i do. the reason i go back to the fundamentals here, it's trading at somewhere in the neighborhood of 80 or 90 times future earnings trailing 12 month over 100 times. that's ridiculous. google is in the low teens. it doesn't make sense. this was a stock that people were hoping to make easy money on on a prayer and a promise. it didn't happen. >> did they price it wrong? >> i don't know that they priced it wrong. because do you blame morgan stanley? they're working for facebook. they're trying to get the most they can. yes, i know there's a negotiation with the buyers. but they're trying to sell a product. when you sell a house you don't put it on the market for a price
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you think that the buyer is going to make the buyer happy. >> maybe in this market, i don't know. speaking of which, let's talk about morgan stanley. an analyst at morgan stanley, lead underwriter for facebook ipo cut facebook's revenue forecast days before the offering. here's what business insider ceo henry blagit, former tech analyst, said about the move on "fast money half-time report." >> i've now been around the tech ipo business for about 20 years. you mentioned inside it and watching on the outside. i have never heard of an underwriter analyst changing estimates in the middle of a road show before. >> what do you think? >> i think this is a scandal that needs to be investigated. >> scandal? >> yes. not just that they changed their estimates, but that all three underwriters changed their estimates. it seems to me like they must have had inside information coming from the company that caused them to change their estimates. and they didn't disclose it to the broad public. i had never heard about this. lots of people who invested in facebook, remember, huge chunk
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of this ipo went to the retail investor. they never got this news. i think that's a big problem for all oflt underwriters here. >> you agree, neil? >> i agree. if there's a real problem here for morgan stanley, this is it. the fd issue about whether they were tis closing this to select institutional investors. this is where the lawsuits are going to start piling up, sue. >> i would assume, jon, this is where the sec -- >> already looking into it. if they're not, they will be by close of business today. >> okay. mark your callen ders. finally, we thought this was kind of an interesting item. friending someone, not your spouse, may hurt your marriage. according to a uk survey more than a third of divorce filings last year contained the word facebook. a growing trend, perhaps? snoo neil, i found this fascinating. apparently it puts temptation in the way of someone who might otherwise stay on the straight and narrow. >> i think is th is -- facebook
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is so much a part of the fabric of our social media apd the way we communicate. of course it's going to come out. the message here for people is anything you put online is public. and assume it is. it's like my old editor used to tell me. whatever you write, think about what's it going to look like in columbia journalism review. it might be there some day. be careful what you do. >> i get a lot of facebook requests from old girlfriends. you can see how it creates a temptation that wasn't there. you used to lose touch with people. you don't lose touch with people. that old flame can get resparked with a little like, a poke. there it goes. >> i'm going to leave it at that. thank you very much. a lot of fun. ty, another reason why you and i will never have a facebook page. let's talk a little bit more about facebook. vanguard founder jack bogle is coming up at the top of the hour, 2:00 p.m. on "street signs." check out your screen. a whole long list of guys having
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time for top of the charts. jeff has one that he has

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